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the role of metrics in social entrepreneurship business modeling


The Role of Metrics in Social Entrepreneurship business modeling

Tracking and measuring as key to impact

As social entrepreneurship today is getting more widespread then ever, impact entrepreneurs are constantly asked to demonstrate whether they are truly making progresses towards generating impact or not. As a matter of fact, without data nor factual proofs no impact can truly be attributed to an organization. Although it may be a challenging and demanding effort, entrepreneurs must take care of this aspect early on in their entrepreneurial journeys. (!!DOUBLECHECK!!)

In this blog post, we will explore the importance of metrics in social entrepreneurship. Also, we will provide insights into how social entrepreneurs can effectively track and analyze metrics by incorporating them into business modeling.

Social entrepreneurship and business modeling

As broadly covered in our platform, social entrepreneurship is all about leveraging entrepreneurial skills and strategies to successfully tackle social, cultural, or environmental issues. Here, social entrepreneurs seek impact while striving for financial sustainability too. Because of that, outlining ways to create/deliver value to beneficiaries, as well as to generate revenues and sustain activities over time is crucial. This practice is what we usually call “business modeling“.

There are multiple business models social enterprises and impact startups can choose to implement to run their activities. We already discussed the main ones in this article. For a sake of time, we won’t drill down again into any of them. Just bear in mind at this stage that business modeling involves designing a business model able to generate both social and financial returns. But how entrepreneurs can actually make sure they are achieving any of those goals? That is where metrics come in.

the role of metrics in social entrepreneurship business modeling

Types of metrics in social entrepreneurship

Metrics are quantifiable indicators organizations use to analyze their processes and performances.

Just like traditional for-profit companies, successful social enterprises usually set clear, measurable business goals and track progresses using specific, selected business metrics. Such metrics may include those related to marketing efforts, sales activities and economic/financial results. If interested, in this article we covered some of the main ones impact startup willing to scale should be tracking.

Apart from business metrics, social entrepreneurs should also identify, measure and report on their impact goals and activities. Unlike business-related ones, impact metrics solely focus on impact making (thus, no revenues nor EBITDA here!), allowing entrepreneurs to determine whether their ventures are generating intended, positive outcomes or not. Since the ultimate goal of social enterprises is creating impact, picking such metrics must be prioritize by change-makers and embedded in their organizations.

The importance of metrics in social entrepreneurship

As you already guess, collecting both business and impact metrics in social entrepreneurship business modeling is important for several reasons.

1 – Measuring impact. We said it before, we’ll say it again: social entrepreneurs aim to create positive social or environmental impact through their ventures. In order to measure the effectiveness of their interventions, impact metrics can help entrepreneurs determine whether they are making progress or how far they are from their goals.

2 – Demonstrating accountability. By tracking and analyzing key metrics, social entrepreneurs demonstrate their accountability to stakeholders such as beneficiaries, customers, investors, or local communities. One one hand, impact metrics can show that they are leaving a mark for a better good. On the other hand, business metrics can prove they are able to do it using using resources wisely and effectively.

3 – Engaging stakeholders and investors . As a logical consequence of the point above, metrics can become a leverage for social entrepreneurs to engage and mobilize stakeholders around their impact mission. This includes increasing opportunities and chances of securing funding, as data and metrics are becoming key criterions for investment and funding decisions by public/private investors, foundations as well as donors.

4 – Improving decision-making. Finally, metrics provide insights necessary to inform strategic decision-making. It is indeed by analyzing metrics that social entrepreneurs can understand areas for improvement, ideate ways to modify or innovate their business models, and make data-driven decisions accordingly.

Incorporating metrics into social business modeling

Integrating metrics into business modeling is thus something social entrepreneurs should forget doing. But how to do that?

The first step should include clarifying both impact and business goals of the social venture. As a matter of fact, this initial phase is critical to set the basis for later identifying and selecting most relevant metrics to track. This is the moment you ask yourself: what are the social or environmental problems you aim to tackle? What are the positive outcomes to generate? Furthermore, what about financial sustainability and organizational effectiveness? It should all boil down to SMART goals to be achieved. 

The second step consists in picking the so-called key performance indicators (“KPIs”), namely the most important metrics for measuring progress toward the above-mentioned goals. This involves selecting both business and impact metrics that are particularly relevant, informative, and actually measurable by organizations. Here, metrics and business modeling truly get intertwined, as such KPIs usually drive the definition of both financial projections and impact performance expectations for the venture.

At this stage, it’s then time to develop a measurement plan. A measurement plan outlines how the KPIs will be collected, analyzed, and reported. This should include building up KPI dashboards, as well as setting up data tracking and management systems, either through automated or manual data processing. Social entrepreneurs must ensure that data collection methods are coherent with the selected KPIs and that clear roles/ownerships are defined.

Once tools and processes have been carefully set up for data collection, the final step consists in analyzing and reporting on metrics. Only by regularly evaluating metrics, social entrepreneurs can indeed inform decision-making and communicate with both internal and external stakeholders their paths of action.

Best practices for tracking and analyzing metrics

Tools and processes to monitor metrics can heavily depend on several factors (i.e. business model, economic capabilities, team skillset, etc.), thus we won’t share a one-size-fits-all solution, as there’s none.

Yet, we believe there are few best practices any impact entrepreneur should follow:

1 – Set clear objectives (together). As said before, before picking any metric or beginning data analysis, change-makers must make sure they have clear objectives in mind. Here, it can be useful to involve the whole founding team, key staff members and, at times, end beneficiaries too. This will help entrepreneurs laser-focus their analysis only on metrics that are strictly bounded to the venture goals.

2 – Focus on trends.No man is an island“.. nor a metric, so to say. Rather than focusing solely on individual data points, look for trends and patterns over time. This can help identify areas where metrics are improving or declining. Without having the bigger picture under control, entrepreneurs may end up failing in strategic decision-making. Thus, it’s important not to forget to compare metrics with external benchmarks, industry standards, or past performances.

3 – Use visualizations. As design thinking enthusiasts, we think there is always a concise, yet effective way to communicate with peers and stakeholders. Using charts, graphs, and other visualizations can make metrics more accessible and understandable by all.

4 – Be transparent. Data manipulation never pays off. Conversely, by being transparent about data, including collection methods, assumptions, and limitations, stakeholders can truly appreciate the reliability and accuracy of both the social entrepreneur and of his/her metrics.

5 – Act on metrics. Last but surely not least: always act on metrics. Again, metrics should be used to inform decision-making, adjust strategies accordingly and improve social enterprises’ overall performances. If impact entrepreneurs end up collecting data without making use of them, well.. it’s pretty much wasted time only. So, act on them, always!

Conclusion

In this article, we discussed the key role of metrics in social entrepreneurship business modeling. Metrics can indeed help social entrepreneurs measure impact and business performances, and align their goals with their values. Furthermore, tracking metrics is also crucial to inform decision-making, to identify areas for improvements, as well as for securing funding and stakeholder buy-in.

As seen, there are different ways to integrate metrics into business modeling. Here, fundamental steps include setting up SMART goals, identifying relevant indicators, determining data sources and collection methods, analyzing and reporting on metrics regularly.

In conclusion, social entrepreneurs must prioritize tracking and analyzing metrics in their business models to ensure the success and financial viability of their enterprises. It’s only by doing so that they can demonstrate impact and refine their business models over time for lasting, impact-making journeys.


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