Before becoming a social entrepreneur, you need to finance your social entrepreneurship journey. Money Money Money! The good news is, you do not need as much money as many people think to start a social business. Here is how to do the maths :)
This article if for those who already have validated their social business idea. Indeed, financing an online business, a workshop business, or a real shop is completely different ;)
The first step, is knowing how much your social business requires.
– List all the elements that you need to pay to start. By starting I mean, being able to provide a version 1.0 of your product/service during the first 6 months (after which sales income should come into play). Keep in mind that you can start “basic” and upgrade once you have validated the direction you need to take with your business. No need to spend thousands of euros on your website if it turns out that most of your clients prefer to follow your (free to set up) social media accounts and rarely go to your website. No need to be perfect, concentrate on being authentic and it will be just fine as a starter (experience talking).
– Estimate their cost FOR REAL. Actually ask 2 or 3 provider for each item so you have a clear idea of how much it will cost. If the price they give you have more then 30% difference, ask 5 different providers, just to be safe ;) Keep in mind: cheap doesn’t’ always mean cheap (as bad quality service often turn out to cost more over time – true story).
The second step, is knowing how much your social entrepreneurship lifestyle requires
– Calculate how much you need to “live” without a salary during 1 year. I am not talking about eating carots and living on a friend’s couch for a year, because being an entrepreneur is too tiring for this kind of lifestyle. You will need to eat well, sleep well, do sport, and have enough money to go out with friends/go on holidays every once in a while to refresh your mind and keep being enthusiastic, energetic, and efficient.
IMPORTANT NOTE: Some say entrepreneurs can’t “pay themselves” during the first 3 years, I say those have a bad strategy (and they should come to me ;). With the right strategy, the first incomes will come during the first few month after the launch of your social business, and you should be at full capacity between month 6 to month 8.
So why do you need 12 months of money ahead? 1. because there might be a costly personal emergency 2. because seeing your money melting every month is hard psychologically, and you do not want to “take that job offer” just before your business is actually up and running ;) It feels so great to have a “few extra months” ahead.
SUPER TOTAL: $$
The third step, is to make that (even more) realistic
– Add 20% (that’s for all the unexpected things you forgot in the first part of this acticle)
REAL SUPER TOTAL : $$$
The 4th step, is to make that less dramatic
– Calculate how much money you can get as a newly established entrepreneur. I am thinking of government grants, but you can also look for social entrepreneur’s competitions, awards, as well as non-financial partnerships (office given for free by X, 6 months legal advises by Z, etc).
– Also integrate how much of YOUR MONEY you are willing to invest into this dream of your. How much do you have in your savings, that you can confidently dedicate to creating a fulfilling career for yourself AND changing other people’s life in the meantime.
NOT THAT BIG IN THE END SUPER TOTAL : $$
As you know, I am basing all my advises on real experience (mine ;). I noticed most people do not share this king of infos.. and it creates a lack of transparency around “how much does it really cost to start a social business”. So here is my maths (with real numbers!)
- logo design + website : 1 500€
- 6 months online entrepreneurship training : 3 000€
- communication and marketing : 0€ (thanks to my training ;)
- lawyer, accountant & set-up taxes : 500€
TOTAL: 5 000€
- rent + home charges (during 1 year) : 8 400€
- food, clothes, shampoo, cheese and wine (during 1 year) : 6 000€
- private health insurance, contact lens and other medical stuff : 400€
- fancy cat food and (numerous) vaccinations : 300€
- Turkish language class and Pilates class (my two activities) : 1 000€
- 2 trips to France (Christmas and summer) to see my family + 1 holiday with my boyfriend : 900€
SUPER TOTAL : 22 000€ (17 000 + 5 000)
Then I made it (even more) realistic..
REAL SUPER TOTAL : 26 400€ (22 000 + 4 400 (=20% of the super total))
- Government grants: 0€ (often the case when you live abroad and thus cannot apply to grant neither in your home nor your host country!)
- Personal savings : 25 000€
NOT THAT BIG IN THE END SUPER TOTAL : 1 400€ (26 400 – 25 000)
Time to do your own maths!
Once it done, your can either:
- < 5 000€ : ask a 0% loan from a parent or a close friend
- between 5 000€ and 15 000€ : do a crowdfunding campaign (watch here some tips by Tom Dawkins, the founder of Start Some Good)
- > 15 000€ : review your business model to bring down the cost (why not starting online only at first?) / move to a cheaper place for a while (a friend of mine is renting her flat in Paris and living in Bali (Indonesia) while she sets up her business.. nice, no?) / find a partner to share the starting cost (warning, it will also take longer to make a living since you’ll have to split the revenues into the founding partners)
See, no need to spend months of energy looking for investors (who will be much more easy to convince to help you scale up your business then starting it, and give you time to make your social business evolve in the direction you want before having external financial performance pressure).
Solène is the Chief Empowerment Officer of Creators for Good.
She developed a methodology that allows Global Citizen to start and grow their own impactful businesses from anywhere in the world – and with no need for investors or government support.