Five reasons social enterprises fail

My start-up failure and my studies of success have taught me, contrary to many autobiographies, that entrepreneurship isn't a mystical combination of luck, personality or hard-won experience. Simply: some ideas work and others don't.

Yet behind many successful social enterprises you'll find a method that reduces their chance of failure and confronts many of the myths about starting a social enterprise.

Following the collapse of my social enterprise, here are five lessons I have learned about why social enterprises fail.

1 The lovestruck founder

Social entrepreneurs are often driven by passion - they've found a new way to tackle a problem and get everyone they speak to excited by their vision. They're convinced that as soon as their innovation has been released, their enterprise will take off.

The lovestruck founder is blinded by innovation. They're so hooked on their idea they they hope budget lines will be created to fit their product. They want to bend others to their will and wait longer than is healthy for this to take place.

Successful social entrepreneurs have passion but it's not for their idiosyncratic idea or the way they do business. It's for seeing a problem and providing a solution. They are passionate about reaching the destination, not their particular patented route.

2 The wrong sort of founder

There's a myth that anyone can start a business. Maybe you just have to have a bright idea, spot an opportunity or just have a winning combination of bravery and bravado.

The reality is harsher. Having a bright idea isn't enough. Few combine bright ideas with the skills of implementation. You need expertise and specialism in the sector or a talent for sales. Having a gift for grant forms isn't enough, a master bureaucrat who's great at tenders may not be so strong at developing a consumer pitch.

You also need to finance yourself, not just your social enterprise. Too many entrepreneurs equate starting a business with getting a job. They take a salary from the business increasing its chance of failure. The business is spending cash it can't afford, reducing the time available to develop a profitable product.

The best social entrepreneurs sell, they persuade people to buy what they have to sell and they are comfortable with that. They are also able to listen, to learn when their pitch isn't working. Behind the best social enterprises is someone who understands that limited liability is just a legal definition.

3 Perfecting the business plan

Traditional advice is straightforward - start with a business plan, explain how you are going to produce your product, what it will cost and who will buy it. Ensure you've covered all angles. You are told this will help you think through the process of running your business - but it doesn't.

There's no correlation between the quality of a business plan and the business, it is revenue that determines the early success of your enterprise. The sooner you are generating revenue the better. Time spent planning often defers discovery. It may get a grant or investment - but persuading an investor is different from persuading a customer to part with their cash.

Some start-ups spend hours choosing the name and perfecting the business model. Some never get their idea off the ground, blaming access to finance or the timidity of civil servants. Others start trading and see what happens.

4 Waiting to make money

Another start-up myth is that it takes time to make money. There are particular challenges to making social enterprises scale - many founders have a unique skill-set and they're so busy doing it, they don't have time to teach it.

The peculiarity of social enterprises are the number of entrepreneurs that pursue ideas that only work at a large scale. Businesses that would solve mammoth problems – but only if millions could be thrown at the problem. Some succeed, others never make it off the spreadsheet.

Successful start-ups are built to scale. The entrepreneur has found not just a product but a way of doing it that is replicable over and over again. It works as well for one as it does for all.

5 Working too hard

A bit of hard work never hurt, right? Starting a social enterprise isn't an athletic trial. It's a mental accomplishment and working too hard reduces creativity.

These aren't five lessons you'll find in traditional business books. They aren't a guarantee to social enterprise heaven but they may help find your path to success.

Matthew Cain is an RSA Fellow and author of Made to Fail: 13 surprising start-up lessons

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